Rockstar at Dalal Street

Topsy-turvy week may be an understatement at the end of five days last week, of crazy trading at the bourses. The SENSEX rose almost 400 points before an impending Syria attack, saw the markets crash by over 750 points, in a single day. The next day saw a smart recovery of over 300 points when new Reserve Bank of India (RBI) governor Raghuram Rajan, the ‘Rockstar’ took over Dalal Street. The markets rose over 700 points in two days following his taking over the post. At the end of a crazy week, the BSESENSEX gained 650.34 points or 3.49 per cent to close at 19,270.06 points.

Reserve Bank of India’s (RBI) newly appointed governor Raghuram Rajan (l) and outgoing governor Duvvuri Subbarao arrive for the handover ceremony at the RBI’s headquarters in Mumbai on September 4. Pic/AFP

The NIFTY gained 208.60 points or 3.81 per cent to close at 5,680.40 points. The broader indices like the BSE100, BSE200 and BSE500 gained handsomely at 3.76 per cent, 3.62 per cent and 3.51 per cent respectively. The BSEMIDCAP gained 2.84 per cent while the BSESMALLCAP gained 2.94 per cent. The top gainer amongst sectoral indices was BSEBANKEX which gained 9.99 per cent. The other gainers were BSEPSU up 8.32 per ent and BSEOIL&GAS up 5.19 per cent. There were just two losers, with BSEIT down 2.13 per cent and BSETECK down 1.09 per cent.

Stocks In individual stocks, the biggest gainer was ICICI Bank up 19.28 per cent. Others included BHEL up 19.20 per cent, Yes Bank up 20.35 per cent, Jet Airways 19.94 per cent and ONGC up 15.98 per cent. There were very few losers at the end of last week. The biggest loser was Infosys, down 2.55 per cent. Other losers included Wipro down 3.2 per cent and TCS down 1.76 per cent. The Indian rupee closed stronger at Rs 65.24 last week, against Rs 65.70 in the previous week.

The markets seem to have given thumbs up to Raghuram Rajan (RR), on his taking over. FIIs were buyers of equities of Rs 1,780 crore while for the month of August they were net sellers for R 6,200 crore. The change in trend is appreciated, but one hopes it lasts. Domestic institutions were net sellers for the week of R 700 crore, while for the month it was net purchases of R 1,605 crore. The contrarian theory is that when FIIs sell and there is pressure, our institutions are there to buy and vice versa continues.

World The G20 meeting held earlier last week in St Petersburg, cleared immediate doubts about military intervention in Syria, with the group divided. Secondly, the BRICS group of nations urged the US to phase out the support that the FED was giving to the economy, in an orderly manner. Global concerns on this easing happening with immediate effect, put markets at ease. These two factors and the ‘RR’ factor aided the rally in the Indian markets, but one needs to be abundantly cautious that the ground reality about the economy has not changed one bit.

Domestic The government is expected to take a call on raising diesel prices later this week or so and the only thing holding it back, is a political call. CNG prices were raised by 8.35 per cent to around Rs 39. One wonders with petrol prices being raised earlier, followed by CNG last week, why the apathy to diesel price hikes? It simply cannot just be political as the common man uses petrol in two-wheelers and CNG in auto-rickshaws, taxis and transport buses.

Diesel is not used by the common man and the poor farmers' consumption for his tractor and handsets is insignificant. One wonders when this anticipated and necessary diesel price hike comes, because as of now no matter how many times the Finance Minister may reiterate that the deficit number is sacrosanct, the same cannot be maintained as the fuel subsidies have skyrocketed.

Crisis The National Spot Exchange Limited (NSEL) crisis has become larger than life and now with Parliament adjourned, one hopes that action is taken against those who have borrowed money and diverted the same to other uses. The amount involved is too large to simply ignore and more importantly, the fact that it concerns commodities and agriculture produce, credibility of the system and the country needs to be restored. One does understand that there is political patronage in this entire episode, but in order to instil investor confidence and restore sanity, we need to sacrifice some interests for the greater benefit.

Ahead This week will be stormy with a trading holiday on Monday. on account of Ganesh Chaturthi. Key levels for the SENSEX are 18,840 and 19,570 while they are 5,525 and 5,785 for the NIFTY. The support for the SENSEX is at 19,034 points, then at 18,728 points, then at 18,526 points and finally at 18,166 points. It has resistance at 19,399 points, then at 19,653 points, then at 19,764 points and finally at 19,907 points.

The NIFTY has support at 5,601 points, then at 5,555 points, then at 5,479 points and finally at 5,360 points. It has resistance at 5,723 points, then at 5,808 points, then at 5,869 points and finally at 5,908 points. This week could be yet another volatile one and needs to be carefully negotiated.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in

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